[Click eStock] "Banking Sector Value-Up Expectations... Top Pick KB Geumyoung"

Mirae Asset Securities identified KB Financial Group as the top preferred stock and Shinhan Financial Group as the second preferred stock on the 9th, amid high expectations for the inclusion of the banking sector in the Value-Up Index.

Researcher Taejun Jung stated, "The banking sector will account for a significant portion of the upcoming Value-Up Index because it has been the most active participant in the government's and authorities' Value-Up program."

In fact, starting with KB Financial Group, which was the first to announce its corporate value enhancement plan, all listed banks have either announced or previewed their plans. Among the companies previewed in the Value-Up disclosures, 6 out of 19 are banks, and among those announced, 2 out of 12 are banks.

Researcher Jung added, "It is necessary to estimate what other criteria besides disclosure might be considered. The shareholder return ratio, which comes to mind first, is expected to be superior in the banking sector compared to other industries."

He continued, "However, since there is no guarantee that all banks will be included, if approached from various criteria, KB Financial Group and Shinhan Financial Group are expected to have the highest likelihood of inclusion based on both 2023 data and projections for 2024 and beyond, due to their high shareholder return ratios."

He further explained, "On the other hand, if the index is composed mainly of companies with high Return on Equity (ROE) and Price-to-Book Ratio (PBR), as seen in Japan, the banking sector may face some disadvantages. The 2023 average ROE over the past 10 years, excluding JB Financial Group, falls below the commonly cited 10% cost of capital, and the PBR is also well below 1."

He added, "Nonetheless, if we narrow down the candidates, JB Financial Group and Hana Financial Group, which have high ROE, are likely possibilities. Regarding PBR, the order from highest to lowest is KB Financial Group, JB Financial Group, Shinhan Financial Group, and Hana Financial Group."

He concluded, "Therefore, considering shareholder return ratios as well, KB Financial Group, Shinhan Financial Group, Hana Financial Group, and JB Financial Group are judged to have the highest likelihood of inclusion in the Value-Up Index among banks. However, fundamental pressures are expected to continue increasing separately."

He elaborated, "This is because the net interest margin based on new loan amounts and outstanding balances is similarly pressured. Recently, the increase in demand centered on mortgage loans is also a burden on net interest margins."